Skip to main content

tv   Tonight From Washington  CSPAN  July 24, 2012 8:00pm-11:00pm EDT

8:00 pm
to try to solve allin ducks session. islamic senior congressional reporter for bloomberg joining us from capitol hill thanks for the update. >> whether to move forward with the debate on the legislation that's happening at about 2:15 eastern. a travel ban on people with hiv
8:01 pm
was lifted in 2010 allowing the conference to be held in the u.s. for the first time. in this part of the conference assistant secretary said the u.s. set the goal of reducing new hiv infections by 25% by 2015. this is 20 minutes. >> our next speaker it's my pleasure to introduce is dr. howard koh, the assistant secretary of health of the united states department of human and health services. a former commissioner of public health of the commonwealth of the state of massachusetts he's also served as a professor of medicine and associate dean at the harvard school of public health. a graduate of yale college and medical school he is the author of over 200 papers and the
8:02 pm
recipient of numerous awards. it was not until 2010 that the united states had its first national aids strategy introduced by president obama. this strategic plan has shaped the public health response for the country over the last two years. now i welcome him to address building on success a national strategy to save lives. [applause] >> dear friends and colleagues, i am so honored to join you this morning on behalf of the united states government to present the status of our commitment for an aids free generation.
8:03 pm
in particular, i am so pleased to review the developments and the implementation of the first-ever comprehensive u.s. national hiv/aids strategy, which addresses many of the domestic challenges already reviewed in this conference. this strategy also incorporates lessons learned from our many domestic and global partners. it was more than 50 years ago when the first hiv cases were identified in the united states. during this critical time, i was beginning my tenure as the chief medical resident at the boston city hospital. i will never forget the patient is that we lost and the way they suffered. since then, more than 640,000 americans have lost their lives
8:04 pm
to aids. and today an estimated 1.1 million people are living with hiv in the united states. one in five is unaware of his or her infection. while a u.s. infant's remains stable in recent years, with approximately 50,000 new infections annually, this figure is unacceptably high. we also know that in the united states the burden of hiv is not shared equally by population or by region. populations most affected include men who have sex with men of all races, in particular african-american and latino men, women of color and transgender women, people who use drugs, and young people the especially young black men who have sex
8:05 pm
with men. region's most affected include urban areas, the northeast and the south. none of this is acceptable. so many in our country have contributed to building a system of protection that by providing linkages to ongoing care leads to the role suppression. but in the united states only one in four people living with hiv currently achieved the level of suppression needed to preserve and reduce the risk of hiv transmission to uninfected partners. national strategies are critical to effective country leadership on hiv outlining a framework for responding to hiv/aids in ways
8:06 pm
that reflect each country needs epidemiology, disease burden and trends and demonstrate the and portents of country ownership and the need to maximize the efficiency and effectiveness of hiv/aids programs. in 2009 president obama made it a top priority of his administration to develop a comprehensive bate strategy. when drafting the plan, the white house office of national aids policy consulted with people living with hiv, community-based programs, health care providers, researchers, public health experts and others. the white house office of national aids policy also consulted with pepfar and reviewed existing hiv strategies from various countries in the global north and south.
8:07 pm
pepfar has long prioritized supporting countries as they develop and implement national strategies maximizing the efficiency and effectiveness of our programs with a shared area of emphasis between pepfar and domestic hiv efforts. following 2010, when president obama unveiled the national hiv strategy, he noted, and by quote the actions we take now well below upon a legacy of global leadership, national commitment and sustained efforts on the part of americans from all parts of the country and all walks of life to end of the hiv epidemic in the united states and around the world. [applause]
8:08 pm
this process of dialogue continues today. the white house recently completed a series of these committee dialogues across the nation where ideas and implementation of the local level were discussed with key stakeholders. and to date, the national strategy has reinvigorated our efforts and reenergize our communities under the one unifying set of goals. and in a short period of time, we have demonstrated progress on the national strategies. in particular each of the goals is guided by strong science and a solid evidence of hat works best. we have the benefit of the leading scientists and researchers at the national institutes of health peery midday and other researchers
8:09 pm
across the u.s. and the world have contributed to many of the scientific breakthroughs that provide us with the knowledge and tools to in the aids. first is to reduce infections because after all, this is a preventable disease. by the year 2015, we seek to lower the number of infections by 25 per cent. we plan to do this by reducing the hiv transmission rate and increasing the percentage of people living who notice that this to reach these targets are as well was support similar global efforts to reduce hiv instances and continues to invest in cutting edge prevention research related to vaccines and microbicides and we
8:10 pm
are so pleased to see the greater emphasis on the use of treatment as prevention. also, last week's approval by the u.s. food and drug administration lacks a milestone for the pre-exposure prophylaxis and adds another tool to the efforts to reduce the incidence. as part of the national strategy, the department of health and human service agencies are charged with realigning federal dollars to concentrate on both geographic areas and populations with the greatest need. to that end, the center for disease control prevention launched high impact strategies in the most heavily affected populations and promoting its recommendation that every adolescent get tested for hiv at least once in his or her lifetime and it up those with
8:11 pm
increased risk get tested once per year. for example, the center for disease control and prevention has released a new social marketing campaign called testing makes us stronger. that was designed for and in consultation with african-american gay and bisexual men, the fastest-growing demographic in the united states for hiv infections. meanwhile, the department's health resources and services administration national network of 8100 publicly funded community health centers skilled up hiv testing for low-income people leading to a 13% increase in persons tested last year alone. [applause] and communities are implementing more creative strategies. here in the nation's capital the
8:12 pm
district of columbia's department of health takes hiv testing available at the department of motor vehicles for customers waiting in line for a driver's license or other services to get a free hiv test. [applause] of to 35 people are taking advantage of this resource everyday. we need to continue to build on this effort and others to reach people in a non-traditional settings. the second goal of the national strategy is to increase access to care and improve health outcomes for people living with hiv since fewer than 50% or retaining inconsistent care. currently, the health resources and services administration ryan white hiv/aids program a federal government program that provides services to low-income people
8:13 pm
and publicly funded community health centers are working together to expand nationwide access to care for people living with hiv. in addition, the new health care law signed by president obama two years ago is crucial for hiv/aids and implementing the national hiv/aids strategy. [applause] thanks to the affordable care act, we are putting into place common sense rules that prevent insurance companies from looking from to the people with hiv/aids from the market for cutting the rate or sending new policies because they're preexisting conditions. [applause]
8:14 pm
specifically the preexisting condition ban will apply to all americans on january 1st, 2014, and it's already in effect for children. the affordable care act also expand access to services including making hiv screening is available for women at no cost. [applause] and in 2014 and will extend coverage to millions more americans that will result in a dramatic expansion of coverage to people living with hiv. recently the united states secretary of health and human services kathleen sebelius announced important actions relevant to the national strategy second goal. first the secretary announced nearly $80 million in new grant awards that will expand care to an additional 14,000 low-income people living with hiv/aids, and
8:15 pm
based on estimates provided by the state administrators will be eliminated in the waiting lists for aids drugs treatments. [applause] senator sebelius and announced the department is working in the partnership with the pilot program that will use mobile phone text in, provide important tips and reminders of the disease management of people living with hiv the hiv health disparities in the nation complex social and economic factors including poverty, stigma and lack of access to care let opportunities for prevention and treatment to better address many of the social determinants we've expanded our efforts to work
8:16 pm
across the programs administered by our colleagues in other federal agencies such as the department of housing and urban development, labor, justice and veteran's affairs. we have also engaged leading national organizations to support the population hardest hit by hiv. for example, the center for disease control and prevention act against aids leadership initiative represents a partnership the leading national african-american and latino organization. it is designed to increase prevention efforts throughout reach communications and mobilization. in the united states for the hiv diagnosis. among the women the epidemic disproportionately affect women of color particularly black women gender based violence goes
8:17 pm
hand-in-hand with the disease. women and girls are frequently victimized by violence and sexual assaults. this increases the risk for acquiring hiv and also blocks women and girls from seeking prevention options and treatments. this is unacceptable. [applause] to address the gender disparities the white house recently established on the intersection of hiv/aids, violence against women and girls and gender related health disparities. this group is working to share best practices fasuba hid researchers and foster opportunities with partnerships. finally, we know that stigma drives discrimination and
8:18 pm
disparities. as a result, too many americans avoided of running the hiv status, disclosing their status or accessing medical care. to overcome stigma, and our efforts include a new center of disease control prevention campaign called let's stop hiv together which features people living with hiv, standing with their family and friends and calling on all americans to join the fight against the disease. the national communications effort will not only address stigma associated with the infection but also complacency about the epidemic. we must prevent the next generation from suffering the burdens we have witnessed in the past. in conclusion, we are making important progress in the first two years of the national
8:19 pm
hiv/aids strategy but much more lies ahead. we can succeed by making our international public health community even stronger. over the years the united states has been part of the effort to build that community along with so many domestic and normal partners and in particular, pepfar has coordinated the power of us working together to plan, coordinate and collaborate to save lives. as we go forward let us reflect on the past would accelerate our efforts in the fight against hiv/aids for the future. here in the united states, we believe the national hiv strategy can bring us closer to a vision of a society where new
8:20 pm
infections are rare and everyone receives the care they need and deserve. you can follow our efforts to implement the strategy on aids.gov. my hope is that together we can seize this moment of opportunity and channeled its momentum towards achieving our goal of an aids free generation. thank you very much. [applause]
8:21 pm
the house judiciary committee is considering a bill that would allow states to tax internet transactions even when the seller doesn't have a presence in the stake. at this hearing members heard from tennessee governor and utah state representative wayne herber. this is two hours and 45 minutes. >> without objection to the chair is authorized to declare a recess in the committee at any time. we welcome our witnesses and we welcome the large amount of interest in the subject as well. i'm going to recognize myself for an opening statement and then the ranking member. last november the judiciary committee held a hearing to explore whether congress should enable states to collect sales taxes from retailers like a physical presence in the state. today we will consider whether
8:22 pm
the legislative proposal authored by our colleagues, congressman steve loebsack of arkansas and congresswoman jackie spinner of california. their bill, h.r. 3179 the marketplace equity act of 2011, has bipartisan support from members both on and on the committee. in the 1992 case of not to cover, the supreme court held that under the dormant commerce clause a state may not compel the retailer to collect and remit the state sales tax the retailer lacks a physical presence in the state. the supreme court's view to for savory character collect taxes to more than 9,000 state, county and local tax interest actions throughout the country places a serious burden on the retailer's ability to sell and interstate commerce. the physical presence rules for tax collection mix interests that cannot afford to track and comply with 9,000 different tax codes as a cost of doing
8:23 pm
business throughout the country the constitution doesn't allow one state to reach into the pockets of another's deutsch retailers to exact taxation without representation. the brick and mortar as retailer plame the physical presence creates an unlevel playing field between them and their online retailer counterparts. online retailers to maintain a very limited physical presence and use common carriers to fill orders enjoy a competitive advantage over the traditional retailers. this is because most states cannot compel the online retailer to collect and remit its sales tax in the neighborhood of brick and mortar stores must collect and remit taxes on the purchases. moreover, state and local governments to the taxes they cannot collect almost online sales has lost revenue. it's true that online consumers reside the data show that they are easily avoided, rarely paid in the difficult to enforce the decision was based on the
8:24 pm
observation that compliance with numerous tax interest action laws would be burdensome and confusing. the constitution does not require a physical presence standard as a tax collection criteria. congress may pass legislation that uses a different standard under its power to regulate the commerce. marketplace equity act replaces the physical presence requirement with a requirement that state and local governments significantly simplify their tax policies if they want to collect sales taxes from out-of-state retailers to read it also contains an exception from the tax collection for small sellers. in a bill to enable sales tax collections from remote vendors should contain a robust small cellar exception. this doesn't become their tax collection agency for those 45 states with a sales tax. today's hearing is on the marketplace equity act at least two other similar bills have been introduced in this congress. one by the senator durbin and alexander called the market is
8:25 pm
fairness act and one by the ranking member of this committee mr. conyers called the main street at. we look forward to hearing from witnesses today and appreciate their testifying and the ranking member the gentleman from michigan mr. conyers is recognized for his opening statement. >> thank you. chairman smith for a very excellent description of the issue that brings us here today to be diced in working on this since 1998 with spencer bachus and then bill delahunt of massachusetts, and i have a bill of my own, h.r. 2701 that i want to announce today i am going to ask all of my co-sponsors to join me with the measure that is before the house today.
8:26 pm
i think this is an excellent resolution of what you have been -- we have all been working on for a number of years. this matter comes to the house judiciary committee because the commerce clause article 1 of the commerce section article 1, and what we try to do is follow the advice of the decision, and i think by addressing it, we will go about a more competitive equity among the retailers. now, i think the bottom line is simply the tax-free sales on the internet may be coming into en
8:27 pm
end, and this could mean a very large boost in revenue. i think it would help the economy, and i said just it would probably also help or create more jobs. now, the competitors should compete on things other than sales tax policy and so for those arguing for more of a pre-market, they should support eliminating any competitive advantage based on sales tax policy. in addition, uncollected sales taxes have a negative impact on local communities including retailers and local and state governments and neither the technology has eliminated much
8:28 pm
of the difficulty that we have experienced before with ever-increasing online sales we can anticipate significant losses as a result of uncollected sales and taxes. in my state i have an example that we could lose as much as $872 million during the fiscal year trujilo 2012 and 13. fortunately, the federal legislature can assure a level playing field in adjusting state revenues by passing this bipartisan support of legislation that allows the states to require the remote sellers to collect and remit
8:29 pm
sales tax. so, with that, i join the chairman and welcoming our two colleagues to describe the bill, and i would ask unanimous consent to put the remainder of my statement in the record. >> without objection, thank you for your comments. first panel consists of two colleagues and they happen to be the authors of the piece of legislation and what this hearing is about to be the first witness is congressman steve womack who represents the third district of arkansas. prior to his election in the house this congress he served as the mayor of rogers arkansas. he's the sponsor feature 3179 the marketplace equity act and is a member of the appropriations committee. we welcome you here today. ..
8:30 pm
and only congress can result. i would also like to thank my colleague and code sponsor, jackie speier for help in ability for you. this bill levels the playing field in the world of retail sales. currently it, they trespass to do now understand, traditional retailers, i'll refer to them as
8:31 pm
brick-and-mortar retailers, collect sales taxes on purchases made in respect to stores. these taxes are admitted to the political subdivisions to that event, typically by the state department of finance and administration. this was not an option for the retailer. it is a requirement. there is no requirement however, for online, remote retailers with no presence in a given state to collect such attacks. the united states supreme court and in 1892 decision, quill v. north dakota will it states cannot make such a requirement on states that do not have the next story presents in the state. the burden of remitting these use taxes falls on the consumer, not the retailer. and the realistic effect of the situation is bad for traditional retailers, diverse cities, counties and states to levy sales taxes and bad for
8:32 pm
consumers who are unwittingly exposed to potentially incriminating audit issues. mr. chairman, in short, the quill decision says that only congress can remedy the terrible disparity and it is my strong belief that congress should intercede. prior to serving in congress had the honor of serving as mayor of a city in northwest arkansas that has become a premier destination for retail shopping from a revitalized main street and new outdoor lifestyle center in arkansas with a basis for more than a billion dollars in local development during my tenure. he created thousands of jobs, revenue generated through retail sales growth lifted our city, county and our state. these retailers in my district and retailers across america are crying out for help to eliminate the loophole that she says more and more discriminate shoppers away from main street into the
8:33 pm
internet, where the feeling of buying something tax-free is all too often a major factor for shopping online. small retail stores have become shared rooms for their online counterparts. merchants had intimated to me the stories that would be consumers in growing numbers, visiting their stories to get a firsthand look at the merchandise under consideration for purchase. once committed to purchasing, simply use their smartphone to purchase it online. there is an apple for that. having it delivered to their home and motivated by the opportunity to save the tax. i do very little online shopping. her recently, having made a purchase from a well-known online retailer without a presence in arkansas, i realized the burden of remitting the taxes on me. so i downloaded the proper form, filled it out and enclosed a
8:34 pm
check to make state's department of finance. this is the format used for the state of arkansas. and there are other forums i have with me. just a sample from a three-page form from the state of florida. here is a form from indiana, virginia, ohio. and still another from tennessee. it occurred to me, mr. chairman that a lot of my constituents don't know this is a requirement. and when told of the requirement, would not know how to process the payment. these transactions commit millions of them every day are simply going without proper tax treatment and that the exponential growth of internet retailing, the result of traditional retailers, not to mention critical, local services is devastating. it is time this loophole is closed. our bill, h.r. 3179 is purpose
8:35 pm
to doing just that. it is simple and straightforward. it is not instructive. it is permissive legislation, just like the quill decision invited us to do and our bill is based on three conservative values. the states rights, allowing states to decide whether or not to compel remote sellers to collect and remit. to determine the rate in the method of remit sins. promoting free-market competition, allowing discerning shopper to make decisions on price, convenience, service, not on an outdated tax policy weighted to one business model. in keeping taxes low, helping our cities, counties and states meet their growing demands by avoiding the certain reality of raising other taxes to offset the exponential loss of sales tax revenue.
8:36 pm
i've heard the arguments against the legislation. it's too complicated. too many wraiths, punitive to small online retailers. the notion of this involving a new tax. it is not complicated. there is existing off-the-shelf software to make the necessary reports and our bill requires the states to provide the software. and just as it's easy to track in real-time approaching storms or traffic congestion, even activities of this institution is also very easy for online merchants to provide the necessary documentation and payment of taxes, just as their mainstream counterparts do. plus, our bill has a small business exemption to lessen the burden on small operators in the newly formed even retailers. mr. chairman, this is not a new tax. this is an existing, lawfully to tax imposed on consumers. the difference is that it's paid
8:37 pm
to the traditional retailer the time of purpose and the remittances handled by the retailer. for the online shopper, the obligation is on them. the traditional brick-and-mortar retailers not asking for special treatment. they know they have to compete against a number of consumer criterion. what they don't want and should not compete against is a disadvantage based on a tax loophole. the simple legislation, we can finally address an issue that has been 20 plus years in the making. i plead with this committee to give favorable support to bring in this goes to the floor. i thank you for your time. >> thank you, mr. womack. congressman speier. >> thank you for giving me the opportunity to discuss this important issue on h.r. 3179, the marketplace equity act. i am very proud to partner with
8:38 pm
congressman while not on this truly bipartisan effort. as a republican from arkansas and a democrat from california to come together on a bill that deals with tax issues, then the time has really come to finally resolve this issue. this is an issue that only congress can resolve. the fundamental unfairness in the marketplace and in our communities that this bill addresses has grown dramatically over the past few years. when the quill was decided by the supreme court in 1992, the internet and the world wide web did not even exist. sales taxes were collected on almost all retail sales. according to the commerce department, online retail sales have increased 300% to $224 billion over the past eight years. and they are expected to almost triple i can over the next eight to more than $600 billion. and this chart over here makes
8:39 pm
the case. and this is the key. it will overtake -- overtake the sales at brick-and-mortar stores by the year 2020. this is clearly not a business model in its infancy. there should be no doubt that this is not a new tax. consumers of sales and use tax that is perched as in all states of the sales tax. but only about 1% actually pay them. this is an issue of collection and fairness. some retailers have to collect a tax on the consumer and some don't, for the very same product. that's just not fair. now, a poll commissioned by amazon that was just released makes the case that 72% of respondents believe it is the sellers responsibility, not the purchasers to collect vat tax.
8:40 pm
state and local governments impose sales tax to help pay for essential public services such as police, firefighters and teachers. as online sales grow, financial has two communities get more severe. each sales tax dollar not collected as a service not provided impossible job is lost. these archives to police, fire and schools. in my district and i'm sure is happening at all of your districts as well. compounding the problem to our communities, the brick-and-mortar stores they can not compete with online sales are closing. seven dollars out of every $10 spent at a local retailers. here is a chart that makes that case. more than $4 out of every $10 spent at a national retailer stays local, but none, zero at the money spent at an online
8:41 pm
retailer stays in the community. that means that they are paying rent, local taxes, but the online retailers pay none of that. they are being able to use a smart retailers as their virtual showroom. godhead has been at a time and financially strapped consumers are looking for ways to stretch their dollars as far as possible. good advice, kicked the fires on products like tvs, computers and bicycles and buy the item online. sometimes, ride on their mobile phone while standing in the store. dirk mcchrystal to rent a power tool company and seeing carlos told me it happens
8:42 pm
regularly. people come in and test our children go online because they can escape the sales tax. even though it still. it simply isn't her to merchants like eric would've invested in a storefront in hired employees to provide the service. ultimately, it isn't fair to the taxpayers who has a little obligation to pay, but isn't able to easily fulfill it or doesn't even know that they owe the tax and could be subject to audit and penalties for failure to pay. as ranking member conyers said, this is also about jobs. brick-and-mortar retailers create for jobs for every one job created by an online retailer. and they participate in our community. dave joined a chamber of commerce and the rotary clubs and wine clubs. they are engaged in our communities. so why should we be created that environment are places that is
8:43 pm
such a disadvantage? why are we picking winners and losers in this particular setting quiet the same way technology has made it easy for online shopping, technology has made it simpler for online retailers to collect sales tax. since congress must grant authority to this day, our bill has provided a simple framework for state to opt-in. it also requires states to provide the software as services to figure out the sales tax required to comply with online retailers. this is certainly more than brick-and-mortar retailers get. once upon a time there is a valid argument the internet marketplace within a deficiency and we didn't want to stifle its development. those days are gone. companies like amazon and overstock.com are proof of it. california is expected to lose more than 1.8 alien dollars and i'm collected tax revenues this year alone.
8:44 pm
others try to peer has every state represented by u.s. members of this committee and you have a handout that will provide you with this data. it shows an incredible loss of state revenue, state taxes, sales tax that should've been paid, that was not paid and the number is growing exponentially. the failure of congress to address this issue has led to more, not less confusion in the marketplace. instead of a national approach, desperate states are taking their own actions in response to this problem. there are the streamlining states, and the states have expanded the reach of and access. at least 30 states have taken some action to try and collect sales tax out from online sales. rather than hide his head in the sand, congress could solve the issue for all states by allowing states to require online sellers to collect tax, even if they do not need a physical tax.
8:45 pm
it can set conditions that states that most wish to do so come ensuring that is simple and not unduly burdensome couple at the same time respect and states rights. that's what they urge congress to do 20 years ago. that is precisely what the marketplace equity asked. it's not perfect, but it's had it's in the right direction and i urge you to recognize the opportunity as one that a bipartisan congress can fix. thank you for the opportunity. >> thank you as for your testimony. i appreciate your comments about move on to the next panel. [inaudible conversations]
8:46 pm
>> mr. chairman. our first witness is the governor of tennessee, who is on his way. and when he arrives, you'll be introduced by the gentleman from tennessee, mr. colin. do not proceed to introduce the other witnesses who are here will look forward to the governor's testimony when he arrives. >> until he comes, could i be alexander haig? >> no. [laughter]
8:47 pm
>> after the governor come our next witness is the honorable wayne harper appeared mr. harper is a member of the house of representatives and the state of utah and as incoming president of the sales tax governing board on whose behalf this year to testify. the access tv was started 12 years ago with the goal of finding solutions for the complexity of the state sales tax that stands resulted in the supreme court's holding in the quill v. north dakota. today, 24 states have subscribed to the principles. representative harper who holds both a bachelors or masters degree from brigham young university and real estate development and consulting. our next witness is hanns
8:48 pm
kuttner, where he contributes to innovation initiative. he served during the george h. debbie bush administration on the white house's domestic policy staff. more recently with a research associate at the university of michigan's economic research initiative. the author of many recent articles on sales tax, including recent article comparing origin and destination-based tax models. mr. kuttner holds a bachelors or princeton and a masters degree from the graduate school of public policy studies at the university of chicago. our next witness is joseph henchman, vice president of legal state projects at the tax foundation, nonprofit organization dedicated to educating taxpayers about all aspects of tax policy. he joined the tax foundation in 2005. mr. henchman's analysis of issues and tax developments is
8:49 pm
featured in numerous print and electronic media including "the new york times," cnn and "fortune" magazine. in this hearing in 2007, he published an article in a popular state taxpayer article entitled, wide the physical presence standard shouldn't go the way of personal jurisdiction. mr. henchman graduated with a degree in political science and a law degree from the george washington university. our last witnesses steve delbianco, executive director of netchoice, coalition of trade association that businesses and online consumers. i'll share goal of promoting convenience, choice and commerce on the internet. mr. delbianco is well-known for expertise on internet taxation and we look forward to his testimony on the subject today. mr. delbianco holds degrees in engineering economics from the university of pennsylvania and a business degree from ward. we welcome you -- the governor
8:50 pm
has arrived in the gentleman from tennessee is recognized to introduce as governor. >> thank you, mr. chairman. it is indeed my privilege to introduce the honorable bill hassell haslam. i think i may provide your dissent is tied. but he also represents the western part of the state, john whitty from memphis from christie. that's why were made to type today. we are well represented from that this to knoxville. he was very successful in his family business. when the governorship with the largest plurality of any governor in the history of the state of tennessee and probably has the highest approval rating of any politician in the state of tennessee. his heart remains during the republican in tennessee because sir howard baker, lamar alexander, bob corker and others
8:51 pm
that have kept tennessee in the mainstream of america. it is my honor to work with governor haslam. we've worked together on other issues, senator alexander and senator corker and that reflect back on his father who is on the board here at the kennedy center and is a leading business person enjoined and helping pass one of the finest lotteries in the history of the nation and its continuous bringing in more and more money that the governor will ensure you spend in good fashion to bring back more and better educated and college graduates in tennessee. with that, i especially am appreciative of the governor being here and look forward his testimony. i yield back the balance of my time. >> thank you, mr. colin. >> thank you him mr. colin. we appreciate the introduction and your services to the state of tennessee. thank you very much in a appreciate you can't accommodate them a schedule.
8:52 pm
i apologize for being a period of her to testify on behalf of the national governors association, but i also think i'm uniquely qualified to testify on this. my family business started out with one retail stores 54 years ago has grown to location of 450 locations across the u.s. and canada. i served as chief executive officer of saks direct, the online saks fifth avenue, so i understand the needs of business as well. i was mayor of knoxville for seven years purblind property tax. if they'd not by residents, the businesses in the critical of having vital matter to a city or local government. finally the governor of a state that relies heavily on sales tax collection. let me be clear, i'm a republican governor that does not believe an increase in taxes. for a low tax would've been able to cut taxes over the last two
8:53 pm
years. this discussion isn't about raising taxes or adding new tax. this discussion is about states having flexibility and authority to collect taxes that are are vetoed are are vetoed by in-state residents. discussion is about leveling the playing field for brick-and-mortar businesses across tennessee and across the community. i've heard senator alexander, congressman colin mentioned the national do company come over on her site where customers come in the store, trying to amass complete questions about the booze to go home and order online to avoid in sales tax. as i was coming up here, i got e-mail from someone who is testifying. gary player to mom-and-pop truck accessory companies may say whatever you do, please tell them our story because the mom-and-pop businesses that sell truck accessories are all going out of business is to folks who compete online and not have to collect this data local sales tax. this is an issue of fairness. comparable businesses that sell the same things are not being treated the same.
8:54 pm
most people i ties to understand and agree that it's not fair. why is that happening? 20 years ago states could require out-of-state catalogs or on my businesses to collect sales tax. it was to congregate to calculate sales tax at each stage, much less local communities. in the past two decades, technology advances by than anyone could've believe. it's not only possible, but not easy to collect taxes out just like local businesses of cash registers. current software available today could go find from a different companies that compete to provide software that covers over 12,000 state and local tax rates. this isn't only an issue that affects businesses. state budgets are stretched and leaders provide services to taxpayers at the lowest cost are we talking about real dollars. the current estimate of sales tax because i'm collected each year in the u.s. has more than
8:55 pm
$20 billion. in tennessee, we believe that number to be more than $400 million. where we have found that if though the money. against uncritical programs for citizens who i am and cover federal mandates or to go back to taxpayers in the form of further tax relief. we can certainly have a healthy discussion in tennessee about how to allocate those dollars, but that is another time. i played today as they have authority to collect that money, which is our view and be able to make such decisions that include those dollars. we probably all know intuitively and in a shopping is a trend on the rise. my daughter and mom buys her dishwashing detergent online. we are no longer talk about books and scarves and a few other items. dishwashing detergent. according to the u.s. census bureau, e-commerce is now 16.6% of all retail sales, one out of every six retail dollars happens online. it is not a small business.
8:56 pm
retail sales grew four times faster online than they did in brick-and-mortar last year. next are 20 million more -- 25 million more americans are expected to shop online. the argument that this is a small piece of the economy just as cold. this is the right time for congress to act. let me make a final note. as governors and mayors, we understand regardless of the discussions come out, there will probably be less money coming out of washington to fund state and local government. if that is true, but states have the authority to collect state sales tax that authority owed us. this is an issue of fairness and actors should take up the issue at this time. thank you very much. >> thank you, governor.
8:57 pm
>> thank you, governor. mr. harper, you're next in line. >> thank you, chairman. ranking member conyers and members of the judiciary committee for the opportunity to present today. today congress is facing one of the most challenging issues regarding state authority over their taxes and also one of the most challenging issues for retailing community. i am a republican state representative from utah and i chair the house rules committee. i come before you today in my will is someone who is responsible for producing the balanced state budget are reducing government's burden on business and the incoming president of the streamlined sales tax governing board. i appreciate the title of today's hearing. that subject is a paramount urgency. as you know the u.s. supreme
8:58 pm
court decisions of the previous century or the base says this hearing. the crux of the issue congress is interested in why we are here is a competitive advantage government grants a certain retailers over others. the bottom line problems that exist today is a 6% to 10% government and a pair of remote business selling the same project as a retailer in your hometown is an inherently low were transaction price. government is picking winners and losers, hundreds of current court decisions. i come before you today to ask you to exercise your congressional authority. tax and business. according to department of 2005 or 87 billion. local retailers across the country often find themselves at team where consumers buy it
8:59 pm
online. why? because there's a cordon government sanction to that remotely as are most sellers are not required to collect sales tax as stores and hometowns. also, states are not providing services or cut their tax rate. let's investigate some arguments for tax simplification. it's impossible or expensive for sales tax. in many ways the internet is the perfect environment in which to collect sales taxes. consumers already supplying to the vendor and shopping cards that's needed to collect sales tax. over eight companies allow for the easy collection of the june sales tax. for example, ebay is currently doing a pilot program the two companies and i quote, delivers small to midsize a fast easy,
9:00 pm
accurate and affordable solution for achieving sales and use tax compliance. second opponents will argue displacing another burden on business and especially small business. unfortunately today the real burden is on those retailers trying to come td can someone who was at collecting dues sales tax. your hometown retailers are at the mercy of a 6% to 10% government mandated price disadvantage. that i submit is the real burden on small business. third, some groups will ask you -- we'll take these pills are a tax increase. that is not true. how may ask is collecting a tax increase? ask you what retailer to collect a sales tax because they have a store in your hometown without asking the same of all retailers doesn't seem like equal protection under the law. some groups claim states don't do a good enough job.
9:01 pm
under current court rulings, basically only two ways to collect the use tax. hide them or educate audit consumers. to those who argue that states should engage in more audits, i asked that they really think we should have a more intrusive collection system in which the average consumer will be made to feel as if they have an auditor at their kitchen table. i reside in the say no. opponents say the state have a simplified tax system enough to work congressional authority. what the supreme court didn't answer in 1967 was how much simpler the state sales taxes would have to be in what technology would have to exist to rule differently. the debate since the decision is how much simplification must be done. in conclusion, i submit the technology has so radically improved at the decision by the supreme court has been answered. resolve individual tax inequitable incher fairness for
9:02 pm
all. what this bill, congress is authorizing collection tool. not a new tax, nor does a tax on retailers. it is time not to eliminate government sanctioned competitive advantage so many have over your hometown businesses. it is time to end the winners and losers in the retail community. it is time to treat all retail as this is the same. i believe congress has the ability to balance appropriately to simplification comes to sovereignty and tax members inequity. i encourage u2 make that decision and act now. thank you. >> gentlemen, we try to work within a five-minute rule possible. when the bread line appears, that says to you you won't be kill. mr. kuttner, you're next in line. >> had been forewarned. i'd be very interested in
9:03 pm
innovation and buying and selling. i prepare to report in this area. >> both of my closer. >> the future market place and some other issues that come up in thinking that the origin base versus the destination days that i'd be appreciative of this hearing. >> without objection. >> thank you. i'm reminded today of the chair the council of economic advisers in the johnson administration. it shows that it is very simple to be an economist and baggage's claim forward every so often it's a marginal cost. remember marginal cost. well, my contribution today assuming so where'd and say, remember the declining cost of information and the cost of gathering information together and making information useful. in this area looking at today by
9:04 pm
the world of 1992 to quill decision rendered, when there weren't smartphones and looking something up in getting a paper documents and having your fingers ran down. and talking about issues but the most junior colleagues that had same can be said to me, why can't you just google that? or why isn't there a smartphone up for that? of that is how much the world has changed since 1992. the thing i would remind you is that information costs is declining and that is going to both change the marketplace and change the challenge of what it means to be an undue burden in this area. thank you. >> you were indeed forewarned, mr. kuttner. you done good as they say in the
9:05 pm
south. >> thank you, mr. ranking member. thanks for the opportunity to testify. to expand the sales tax authority to out-of-state sellers. we have monitored tax policy entrance at the levels and analysis is guided by the principles of economics and tax policy. simplicity, neutrality, transparency and stability. to be american is to be a believer in federalism and that means congress has its area and the states have their areas. most of us have congress about the states do their thing, even if it's bad policy. in a few important situations, congress has the power and responsibility to get involved in state tax policy. this history is important because it is the original understanding of the commerce clause. the constitution was adopted in part to give a federal entity, the congress the power to rein
9:06 pm
in state tax authority that threatens to give hard to the national economy. this is a power he exercised in the past. page six of my testimony gives examples. in those cases you balance on one hand fighting states have the ability to set tax policy is in line with entries for citizens have choices of different baskets of goods and taxes and services was on the other hand ensuring that state tax power does not reach so far as to harm the free flow of commerce from the national economy. indeed from sounding all the way to the 1950s, the rules simple. states cannot tax interstate commerce. we are more nuanced now. congress and the courts permit interstate commerce for his nondiscriminatory, fairly apportioned, related to services and opposed him on the substantial presence in the state. as i'm sure you know besides a battle that already, states heads these taxes imposed on
9:07 pm
items used within a state upon which sales tax has not been paid. so you go to pennsylvania by a pair of blue jeans for their tax-free and bring them back here to d.c. where i live. i odc use tax of 6% in iowa, not the seller. and economists argue either of the burden of it, not the seller. while the purpose of use tax is to equalize tax burdens and thwart tax competition between states and issue are dealing with today is about purchase in a saved state. brick and point out when someone buys from them, they usually pay taxes when someone dies from an eminent retailer they often don't pay tax. so perhaps you let the state whenever they want. that's the other extreme that warned about in quill. they are 9600 sales tax jurisdictions in the state from a number that grows by several hundred each year as a chart on page nine of my written
9:08 pm
testimony shows that appeared to states that direct taxes on different items, sometimes different times of year. i sat down under the statutes and try to figure with a tax and that they don't. revenue rulings try to parse out the things that are clear, plus seven states that local governments have their own sales tax base. but the tax foundation subscribe to sales tax systems and calculation software we talk about here is that for us to keep up were not trained to run a small business. the painting canvas is the dryer for spares or attacks in the rules different the next day another state. if you want to do something about the disparity between internet and brick-and-mortar while making sure states cannot waste their burdens in the complicated tax systems and out-of-state sellers the world over, their options. i run through them on page 15 of my testimony. one option, the bill before you
9:09 pm
it is in our companions. if you look at anything in my testimony could turn to page 6016 less features of effective simplification that should be part of any bill authorizing greater state tax power over out-of-state sellers. as you can see, though before you now comes closer than previous efforts. however, some things are left unchecked. congress has to modify physical presence rules and limited context of use tax from out-of-state sellers. several standards for simplified sales tax must be an effect forward against aggressive state tax overreaching. today this new technology, even small business can sell products and services in all 50 states. temptation is great to treat interstate commerce at the golden goose to be squeezed through the behaviors not presented, the results of the taxpayer uncertainty, incompatible standards and harm the national economic growth. this temptation can only be countered by well-thought-out uniform rules imposed at the
9:10 pm
federal level. at thank you. >> thank you, mr. henchman. mr. delbianco. >> thank you, mr. chairman. i speak for the true simplification of taxation which includes the american catalog mailers, direct marketing and electronic retailing association's. it must be incredibly hard to get a handle on this issue when you hear such contradictory facts on her arguments. i've really enjoyed debating this on the tv talk shows, but i have to admit it's not very enlightening to anybody who watches it. you deserve straight answers today comes the first in this and fairness? equities but everyone plays by the same goals and that's the situation today. every online and catalog retailer like every store collects sales tax for every place they have a physical presence. this but requires remote businesses to pay sales tax based on where the customer
9:11 pm
lives. if you really wanted equity, let's force all stores city sales tax the same way. think about the uppermost on i-95 or souvenir shops in downtown washington, while customers come from out-of-state. equity would mean requiring customers to show an i.d. so the clerk could figure a sales tax where they live in for a return where? no, that's ridiculous. you would do that, but that's beyond her personal legislation would an online catalogue sellers in the states. we talk about quill. the court is concerned not so much by fairness as by quotes, concerns about the effects of state regulation on the national economy, end quote. national economy is an area with the u.s.a. is the world, but for also number one when it comes to complexity the state sales tax. number two is the european union was 22 tvs but they are stating 10,000 jurisdictions in hs two different tax states. yet the legislation endorses the
9:12 pm
state tax disaster enforces businesses and other states to comply. would it be fair and equitable of congress passed the marketplace equity? first, would it be fair to senior citizens whose catalogs and mail female czech supporters? here is a cadillac for a national wholesale established in 1952 in north carolina and the 200 employees today. they sell sensible clothing and shoes for senior women. the average age is 70 years old at 40% pay by check for the mail-in. the national collects sales tax for north carolina, but not customers and other states. it just isn't fair to ask a grandmother to fill out the form in a way that causes us to search through 46 different states and thousands of jurisdictions to find the tax rate applied to her. second, with the speaker to a small business? it has a 1 million but that is not nearly high enough since 1 million is a tiny approbation. let me explain.
9:13 pm
i did a million in gross sales, they'll pay 750,000 or so for cost of sales build up a 70,000 more for travel trade shows, 60 k. for computers and programming the website, another 50,000 for shipping and accounting and if there's anything left, they might be able to pay for two. a million retail sales associates a mom-and-pop operation and it's not fair to hit them with new costs for software, customer support and accounting. it's a more reasonable small business exception? they account for 90% of the uncollected sales-tax flashier. number one at amazon and 50 billion to 500 is a small from the 15 million. you can spare businesses on the long tail and still at the states collect 90% of the attacks. third, would it be fair trade business is just big enough to get over the small threshold? it once a business to be forced to pay for all states. they need radical simplification and reduce administrative
9:14 pm
burdens. this believes that true simplifications. it's not fair for a business in your state to have to file 46 different tax returns every quarter subject of 46 audits every year. these are just two of the 11 missing simplifications be detailed in our testimony. so to conclude, really these are so fair after all and they would unmistakably create a new tax on americans businesses. state sales taxes due from the business he made the sale, whether or not they pass the tax onto consumers. most states call it a business privilege tax for the privilege of doing business in their state. so for businesses in every state can even stay sedona and the sales tax tax of their own, this bill would authorize the uniquely complex for new tax burden. so in closing, please keep in mind costs on american businesses. if you empower state through exports of their tax burdens to external businesses. please compare to the potential new taxes, which at most of the
9:15 pm
less than 1% of total state and local tax revenue. compare this and i think you'll conclude the just isn't worth the squeeze in essence a look forward your questions. >> thank you, mr. delbianco. governor haskell, if h.r. 3179 were enacted it would create additional revenue for a lot of states. what do you think is going to happen to that revenue? is it going to in some form be passed along to consumers that perhaps they were sales-tax? or is it simply going to be spent by elected officials? >> is a great question. one of the beauties of the state system. at the jesse 50 different answers to that question. i think you use it to do a variety of things. our history has been, since we've been in office we've cut taxes both tears and so we would probably lead with that.
9:16 pm
we would apply some to infrastructure? yes, we would try to mitigate some of the rising cost of higher ed. i know you all have looked at that in congress and very serious ways. my sense is the honest answer would be a myriad of ways that money would years. in our state, part of that would be used to cut taxes. >> mr. harper, the ss pgp, which you represent has done good work to make taxes simpler and easier to comply with. deeply simplification requirements built into this comport with the benchmarks? >> i do. there's a lot of safeguards in this bill. i would like to see additional ones small businesses and retailers, but this goes a long way towards addressing the issues. i have a bill with the anticipation that this bill or
9:17 pm
the extent of the bills will pass the logo to reduce the state sales tax rate and basically have this as a revenue mutual impact of the state of utah. >> thank you, mr. harper. mr. kuttner, given the alternative ideas? you may have mentioned in your testimony, than any alternative ideas to level the playing field between the online and bricks and mortar retailers that are not in the bill that we are considering today? >> one way to approach the problem would be to say they're certain categories for online sales for the competition is so unfair that the state should just not taxus categories, but i think then make life more difficult. but another way you could get it that is to narrow the sales tax base to exclude certain taxes.
9:18 pm
>> thank you, mr. kuttner. mr. henchman, there is software by remote sellers to the beat up or down interstate commerce that concern the supreme court in quill. producer question on how well the software works? >> it will facilitate the look of the grace, the rains are everything. indeed there is some jurisdiction was it because do not align the sales tax jurisdictions. just as one example, there is a zip code that straddles the line between california and oregon. oregon has no sales tax. if you put in the zip code of hotel you the complete story. even putting aside just rates, the question of what is tax and what is not is often a question of the raising of revenue rulings in trying to figure out is often unclear. in the testimony of a god -- i pull from a colleague's workers tried to see whether a frat
9:19 pm
pacino drink would be taxed under statutes. some states are and some days not. some is unclear. there's a lot of work they can be done to simplify the software will solve. it's a legislative problem at the state level. >> mr. delbianco committed to your question, too. >> i'm amazed this software makes everything so simple. the governing board of streamlined sales tax paid a million dollars to do a study. what is the cost of american businesses today under the corporal to collect sales tax? they can put a million dollars in sales for spending 17 cents of their own money to collect sales tax for wonders to cease collecting another 17 cents zero cost, only 2 cents at anything to do with software. the rest is the cost of handling exceptions and problems and questions following up on audits and questions to consumers of nontaxable items. there's nothing to the beauty
9:20 pm
him was not kid ourselves. software doesn't plug-and-play in its own system. the virginia seller called the silver gallery who study what it would cost them to modify their fulfillment. there are but a thrill million dollars seller of jewelry and a lot of engraved items and they have to have a custom system to allow the consumer to justify their order. they will spend 15,000 to $20,000 to enter great free software their existing system. >> thank you, mr. delbianco. mr. harper on the software question. >> since the price waterhouse coopers study was done there have been a number of additional players who have players who have come to the table with software. back then were two or three. there are at least 80 that are unattainable today. the software has vastly in root. some of the things were done to the streamlined sales tax is a jurisdictional database. a state certified collection of
9:21 pm
software. vendor compensation come at things of that nature would go through and ameliorate the burden that can be placed on business. i think some of those issues are truly answered today. >> thank you, mr. harper. that concludes my questions. mr. conyers is recognized for his. >> thank you, chairman smith. this seems to be a question that start off with a great deal of excite and about as finally dealing with our obligation in quill, but then it comes down to whether there is a technology sufficient to make this practical. how can i ask cosgrove, governor
9:22 pm
haslam and governor harper -- no way, harper is not a governor. [inaudible] >> not yet. but how can we accommodate the particularly practical objections that have dirty been raised by mr. henchman and mr. delbianco? how do we deal with that ended the table table of witnesses? >> well, i was a couple things. first of all, that's what american industry does best. the progress we've made on
9:23 pm
tracking sales for the supreme court decision is not engaged. that is the first thing. secondly, i do come back to cite some of the testimony, it's really not fair. we say is fair or about who is a retail presence, but everyone doesn't have a retail presence. the reality is your local businesses contributed property tax and sales tax and jobs that are having to play on an unlawful playing field. we have to featurette away to make it work. >> yes, sir. >> thank you. >> the question response from a two other witnesses over here. it's exactly why we want to have the legislation passed. we have the 10,000 jurisdictions in the country. if we go through and require one returned in each state and one audit in each state as this one is promulgated by the streamlined sales tax organization, that is a significant reduction on business. jcpenney has hundreds and
9:24 pm
hundreds of accounting to respond today to sales tax returns and sales tax audits from thousands of jurisdictions across this country. imagine what they and other regions could do if we had a single audit, single returned each month. that could be reduced to make a focus on the core business of developing and designing and selling goods. >> thank you. mr. kuttner. [inaudible] >> is a very steep curve we are on here. in the quill capability command if that is technology isn't going there -- isn't there an app for this yet? there will soon be a group of
9:25 pm
folks sitting down trying to get the app worked out on someone's iphone. >> well, this can be improved. the bill is perfect. those spills when they are finished and out perfect, much less when they start out. but mr. henchman, do you have any suggestions about where you might start in on the improvement of this measure before us? >> certainly. and i agree with you to type elegy is a concern, but also how far stay set to simplify under the legislation is important, too. a beta two can meet in the middle. what an example on the bill that is a great feature is the option of using a blended rate, a combined state and ever so korea up that with retailers to 36 local jurisdictions rather than
9:26 pm
9600. other competing legislation. there are however some features not in this bill that are in some other bills. i go through those on page 16. maybe including those that make further assure that persists among online retailers and the national retailers currently have to deal it can be a lot simpler. >> i think that this committee and another committee and the congress have a lot of work to do. i am willing to begin that because i think the fairness issue override everything the we are here for and that there are problems and i would think all of you to help work them out. >> thank you, mr. conyers. mr. coble is recognized for his questions.
9:27 pm
>> thank you, mr. chairman. gentlemen, good to have you with us this morning. the distinguished ranking member pointed out we've been kicking this issue around and we may be in the study of the shadow of the resolution. i hope so. governor, let me start with you and work our way down to the two-part question. the rhetorical question i think i still would like on the record. will this bill creates a new tax? nv, is it feasible for internet retailers to collect and remit sales -- state sales tax? >> no, they won't bring a new tax. it is a sales tax that is paid. you know, when businesses put their p&l together, they don't show sales-tax odin sales tax paid. it is due from the buyer. that is number one. number two, is their capacity to do this?
9:28 pm
i understand issues and i understand jurisdictions and sales tax holidays in different places, but given the capacity we have today, i am very confident we can solve those issues. >> thank you, mr. governor. >> no, this is not a new tax. what we are asking for is that congress authorized collection tool. it's a software perfect out there? no. as you can give you one improvements will be on. we will see things to make changes that will facilitate improvement in software. but it's come a long ways and i think it is ready for trial and congressional authorization now. >> you think it is therefore feasible for the internet retailers to collect and remit? >> yes because everything that is needed to be told to estate tax authority is already provided by the consumer in their shopping cart. >> thank you, mr. chairman. mr. kuttner.
9:29 pm
[inaudible] is it feasible? yes. the small entity, perhaps is the question -- perhaps not an empirical question. >> thank you, mr. chairman. >> on the question of whether it's a new tax, it's an existing tax not paid by the vast majority of people who should be paying it, whether that's a new tax or not is in the eye of the beholder. a lot of people see it as the new tax. as the question of whether it's feasible, i agree with mr. kuttner's point. it's not that it feasible, but halperin some would be and how much can congressional legislation reduce the burden? ..
9:30 pm
people are coming in from all over the country. you have one little jurisdiction and that accounts for all that that mr. holbrooke last time we had a hearing like this didier understand there is a service that can be provided that what
9:31 pm
ss and calculate the tax just like it's done who now on shipping roi vv to and does the business and then collect a tax and the service to figure out -- >> did you testify last time we had a hearing like this? specter was the senator from indiana. >> did i describe right where you put it on and it does all the calculations for a few? >> there are certified service providers that do have a new software that can go through, and you can use them as a third party if you choose. they will go through and remit. you can run it all through them or some of the larger companies will do it on their own but there are existing software companies that will handle it for you.
9:32 pm
>> what is the cost of that service? >> the cost of the service depends on the company from the streamlined sales tax so the compensation will be provided so that the company will not have to pay for that. the intent for the streamlined sales tax is that there will be that under her compensation so that the retailer will not have to pay for it. it will come out of the tax that is collected as a compensation tool. >> so just like you collect the shipping and handling and of the software what is in a number for no cost to the business you can get the software that will provide the calculation of the tax and you write one check to the service and they will figure out where it goes. >> yes.
9:33 pm
>> and it's no cost to the business; is that right? >> yes -- >> the problem with what is taxable and nontaxable software, too? >> yes, for those members of the streamlined tax program, there are definitions of every product that is out there, and then states will choose what is taxable or not taxable based on the definition that exists. >> is this by the code? >> by product code or type, yes there is a whole bunch of data that you can turn on and off. yes. >> thank you. mr. delbianco, you indicated that your -- if your interest is based on the person's residence and bricks and mortar based on the location the last time we had this hearing we also had another category if the product was purchased from the brick and mortar but delived somewhere else in a washing machine to
9:34 pm
virginia virginia could get a tax. is that right? >> in a situation like that the delivery trucks are delivering good to virginia and the purchaser lived in virginia than the d.c. company but have to collect and remit the virginia sales tax. that is in the situation that we are talking about here because you compare the calculating shipping and handling making it suggesting that makes it easy to new sales-tax but it isn't the case. think about when a sales tax comes in on an address someone has to know is there a sales tax holiday. >> i agree with the fellow making the calculation. mr. harper suggested the part where it plugs and just like the shipping. >> let's assume free software to put in an & product code can return the rate but that's where my problems began. and it is a tax exempt person.
9:35 pm
their own studies show a lot of the cost of collecting sales tax figuring out whether the person purchasing it is doing an exact purchaser. whether it is purchasing or not they get on the phone and call and say why is this item being taxed in my state the refunds and exchanges are the beginning of the extent because every time a product is changed out in the refund or exchange or back order, that has to make adjustments to the systems and the audit. >> let's let mr. harper respond to what the software does and people that may be taxable or not taxable. islamic it is taxable the matrix and yes, you can go to say this is taxable, it's not. we've got jurisdictions, we've got sales tax holidays all of those built into the software so i believe there is a functionality to address the issues which cause you concern. >> thank you mr. space to read
9:36 pm
the gentleman from california is recognized. >> i have to commend the committee on putting together what life is one of the more balanced panels that we have had in a long time. it's been an interesting diversity, and the testimony like so many cases we always kind of get back to this fairness issue, and clearly fairness when you put five political people together or variations of political people together, fairness becomes the tad subjective. i'm a republican procrit, and i served as a chamber of commerce for river 40 years. i'm having a little problem with the governor's assessment not being paid new tax or when you
9:37 pm
have to pass a law to tax somebody, the tax they are not paying to me that seems as though it is a new tax. is it a fair tax? that's where the subject of it becomes. i'd like to ask mr. hensarling a question mr. jolie delbianco or maybe the governor would even like to respond to this. the source, the provider has got a business set up, pays for the business, the state, county come also local jurisdictions get a percentage of sales tax. these are the folks providing the service and the state's where this product is made. it would seem to me that if we had a uniform tax on this type of the transaction, states that are charging 2% would charge 2%
9:38 pm
to every consumer. a state that charges 8% would charge 8% that hoekstra body in that state that only have the provider would only have one sales tax percentage to work with. i'd like to get a response from mr. hensarling first and then perhaps mr. delbianco about the point of origin as maybe if we are going to go destruction nine still wrestling with whether it's been a topic of discussion for a long time. >> i think you might mean mr. kuttner he's written papers on it but it is an option to the committee. it's not the approach taken by this bill, no. >> dalia understand that but it doesn't mean the amendments during the course. >> the issue you might be concerned about is when i describe it to other people the internet business is going to flee to the states with no sales
9:39 pm
tax. we don't all flee to states with no income tax business is done on the fleet states with no income tax, but maybe it's different for this. >> it might not be a bad idea for people to do things to create business in their states' to lower the taxes. i would vote for that. mr. delbianco coming your assessment? >> thank you, congressman. what you described in assisting the tax is based on where the item is sold from. essentially with a brick and mortar stores do today. they don't have to ask where you live even though you are taking the item home they don't calculate the rate to live for final returns. they all presume that you are using it right where you bought and that simplicity is the same simplicity that ought to be applied if we force out-of-state sellers to collect so i think you are onto something. we may need to turn this destination basis upside down and take a hard look at an origin base. >> you have written on this if
9:40 pm
you could be brief enough that i hear from the good governor over there to the estimate and origin based is much more complex. a lot of complexity needs to be thought through. where is the origin for a company going to be where the good is shipped from, where the corporation headquarters are? of the happens to be in a different state. and the question of imports. anything that is imported sold from outside of the u.s. therefore going to become tax-free because it doesn't have any origin inside of the united states. that is the kind of question that comes up. >> but it would appear that the challenges that you have just presented might be a little simpler to work with than 48 different taxes from 48 different states. just my own assessment which i stay open with. governor? >> yy very much appreciate the
9:41 pm
view that lessons in the finest people were its lowest and member states of a different mix of taxes some like us have no income tax so they rely more on sales tax. there is a variety of different approaches, so you are going to be incentivizing folks to locate one place due to one particular tax. >> thank you. i see my time is expired. just a brief response to the governor. unlike california, we have high taxes on everything. income, sales tax, property tax, you name it, we've got to be the estimate we find your state to be a great place to recruit. >> many have been doing just that. i yield back. >> the gentleman from north carolina is recognized. >> thank you. i keep wondering when my friend from california is going to export himself from california. [laughter] >> mr. kuttner, listening to
9:42 pm
your testimony at least before i heard mr. henchman and mr. delbianco, i was tempted to think that maybe innovation is taking place so rapidly that you wouldn't need the 1 million-dollar exemption or the 100,000-dollar exemption that this bill does because you could just pull of an application and would be done pretty simply. that is where we are headed, isn't that right? >> the technology is going to reduce the cost over time. as to where the threshold goes, that is a question for you this time. >> mr. henchman and, i take it -- well, this is a good panel because you've got divisions mr. kuttner doesn't seem to have a dog in this fight he could go either way. >> we sat in the right order,
9:43 pm
too. mr. henchman seems like she could go either way if you simplify the tax. you are not saying this is a bad idea. you just think you would be a lot simpler if you simplified the tax. it's been a good would be simplified if you simplified it. [laughter] >> and mr. delbianco says he doesn't want this i don't care simplified the tax i guess you think this is a bad idea. am i mistaken where you are whacks >> congress than to be a thorough job explaining how it will be to collect and that is why at the end of my testimony on burn to pages describing the minimum simplifications, veterans' applications under which it makes sense to require remote companies to collect. >> all right. well, let's look at some of
9:44 pm
those simplifications i guess some of those on page 16 of mr. henchman's testimony. and you're talking about offering the immunity to the remote suburbs that misapply the sales tax holidays. do we offer immunity to the local sellers who miscalculate? we hold them responsible, why wouldn't be told the remote so was equally responsible if we are trying to apply the law to everybody? >> is that directed at me, congressman? the rationale for be believed would be they have to deal with the sales tax holiday that they are dealing with in their jurisdiction, whereas in online seller would have to deal with this year's 17 -- >> what i am trying to get to is the equal what liquification of tax regardless of whose responsible for it. so i don't think i would be more
9:45 pm
interested in giving somebody and immunity from something that i'm not giving because then you are creating another disparity between in-state and out-of-state the lectors it seems to me. do we compensate brick and mortar retailers for collecting the tax? >> many states do, yes. >> you do. do you compensate brick and mortar vendors in your state, governor? >> compensate in which way? >> compensate the brick and mortar vendors that collect your tax. >> no, we do not. >> do you, mr. kuttner? how do you do that? >> we had a study that was done and the state agreed to it and we put it on the state code. 3.12% of what is collected. >> so you think that would be a fair addition to this bill?
9:46 pm
>> there are other things i would like to see in the bill for the safeguards. but yes better compensation has agreed to between the business and the states would be good. >> what about the required local trust actions to align the geographic five digit zip code do you require that of the brick and mortar retailers? >> we have in the state of utah the jurisdictional database, yes. and you go through and based on where the transaction occurs that is where the tax is imposed and the would be another safeguard for all the states to have. >> but if you are going to a state opting for one of these three options as we understand this bill to do, what sense would that make? >> what it does is allows the states to maintain control of her own estate tax policy and it's used one of the options that best fits their state.
9:47 pm
>> but once they choose one of those options, aren't they basically for going all of the other variables within the state? >> i think it depends what amendments were made. but in the present form, they could be locked in. but i think that is still an item up for discussion. >> i think i am confused enough. [laughter] and i will yield back. >> the gentleman yields backend recognizes the gentleman from virginia mr. forbes for five minutes. >> thank you for being here. this is an important issue and we appreciate your expertise. governor, we are all sympathetic in this issue and trying to work through the logistics with the best piece of legislation coming and one of the questions we have is i know that your state is one of the few states that uses the physical presence standards to the imposition of business activities.
9:48 pm
this committee lauded that approach last year when it voted favorably for h.r. 1439, which was the business activity simplification act that confirms the holding of the corporate income and other business activities. i don't know if you had time to review that bill before coming or not to see if that is how we reconcile that with this particular piece of legislation. >> i'm sorry, congressman, i have not. >> i wouldn't expect you to. i think you testified on that bill when it was year. can you reconcile the little station with that? >> it is an issue that you should be thinking about. the physical presence as i mentioned in my testimony is a cornerstone of the state taxation of not just the sales tax but individual income tax for a long time coming and they seek to enshrine different components of the presence for those tax standards.
9:49 pm
the way that by at least myself relate to the sales tax is the tax we are dealing with is one that is imposed on and has to be paid by the consumer which does have a fiscal presence in the state, and the economists that work in my office tell me they bear the economic burden of the tax while the business is collected and they bear some administrative costs associated with it, the economic burden is passed forward to the consumer. the consumers to have presence in their state so that is how i would reconcile it. >> mr. harper, who do you believe is the appropriate small cellar exception threshold? does this bill get it right and is that something we hold out because it's politically acceptable or is there some substantive reason why we would pick that particular dollar amount? >> this bill has a
9:50 pm
million-dollar small siloed exemption. adel has a 500,000. as we talked about over the streamline sales-tax, for the remote 500,000 is probably appropriate. but it's up to the congress to leave that out and come up with a final factor. >> one of the concerns some people have about the bill is the small silver exemption parts of remote small businesses with less than a million dollars in the state sales into the state actually treats out of state small businesses much better than in state small businesses because of the in-state business still has to collect or remit the tax will be out of state so where does not. is this a problem to you or how do you reconcile that? >> that is non-medical treatment. that is what he might go to next because that is a differential treatment between remote sellers and people within the state. the list of possible simplification of course they don't all need to be done with
9:51 pm
some adopting one might of the the need for another. if we have a simplified system maybe we don't need a small cellar exemption but if we are defined simplification maybe we would need a really high level. i don't know the magic number is. there is no economic policy that dictates but that is the balancing approach the congress should use. >> mr. delbianco, i'm going to let you enter as those in your response but also, i would like for you to address a concern that this is putting small mom-and-pop businesses in a very difficult position that they are going to go out of business. how do you address that condition if we don't do something to offset? >> i couldn't agree more. small mom-and-pop businesses have been getting clobbered by wal-mart, target, amazon for over a decade now and the impact is driven as a last best hope to turn to the internet to try to sell excess inventory to reach customers that may be never darken their doorstep or
9:52 pm
customers that what once and trouble homes of the internet terms of the small business to be perhaps the only way they could survive against the competition that spoke up. just as we are counting on them to create jobs and help our economy recover, this bill would impose on the small businesses obligation to collect not just for the least they are in now but for all 9600 jurisdictions. that to me is the ultimate opposite to use the internet to compete and survive. >> mr. chairman, my time is up and i yield back. thank you for your expertise. >> the gentleman is recognized for five minutes. >> thank you. this is a very helpful during, and i think all of us want to make sure that we nurture small businesses whether they are on main street or whether they are an internet company. i met recently with a woman that
9:53 pm
lives in my district that had retired from the industry she worked for and her early 20s some had cancer and he didn't have health insurance. she spent everything she had to save his life and now she is running a small business out of her living room. she thought she would be retired. she goes to retirement to save his life. i'm thinking of her and people like her running the businesses out of their living room to get by and how is this going to impact them as well as the empty storefront i also worry about but i am mindful i think the big stores have done more to the little small businesses on main street probably in the internet business. the big box stores along with amazon.
9:54 pm
as i look through this, page 14 and page 16 are very helpful because they are giving us things to think about if we are going to move forward on this. and maybe we don't have to do all of them but here is one question that i had, mr. henchman, on your suggestion that it's establishing single tax return for the taxing jurisdictions. are you suggesting the state% in california should be 8% in every city and county? what is your suggestion? >> the devotee one return you have to fill out. for example california where i think i'm originally from california paid may be just shy of 100 jurisdictions rather than somebody in california repeatedly having to fill out 100 different. some of our voters have approved the sales tax increase as premier li transportation and we can overturn what the voters do. >> the tax jurisdiction in
9:55 pm
california. >> have you looked at the software that mr. harper described? >> it's expensive. i don't know how much of a budget your constituent has for software but it's expensive. that may change as technology goes forward but of course the simpler we make the sales tax systems by setting federal standards the cheaper. astana we could make that available for free and require them to make that available for free. but me ask you is the software available online [inaudible] >> we have had in their breath demonstrations. >> can we look at that? >> i can provide that to each of the companies. >> thank you. i'm also interested in how we
9:56 pm
arrived and as other members have mentioned the small-business exemption. and i think that the dollar amounts in the bill are i think somewhat arbitrary. why wouldn't we use with the small business administration says, for the civil war with the irs says is a small business instead of just the sort of the arbitrary numbers? >> i think if i may, the reason for the 500,000 this because that's the members of congress and the house and senate have come up with so we have responded to that rather than the other standards that are out there. >> i guess if we are going to move forward on any of this, i would want to have further examination of that because it seems to me the whole reason for living is the small businesses and they've studied what is a small business and a particular
9:57 pm
type of field we should be guided by that or the irs. i'm not critical of my colleagues that have introduced these bills providing as mr. conyers said these are starting points, not ending points when the bill was introduced and maybe we should get some guidance from either the irs or the sba and what is in fact a small business from the assumption. and i would just close and save at sometimes we think of solutions as going to solve problems and it won't. i was in the local government for 14 years and i know that the revenue is a problem in that the time i was in the local governor and we talked a lot about catalog sales meeting internet sales. but, you know, when you buy something online you have to pay postage, and if it isn't a huge high dollar item, the postage is probably as much as the sales
9:58 pm
tax would be in a lot of these states. succumb to think that the seals application is somehow going to, you know, -- it's not just the sales tax. it's the availability of inventory in some cases. it upsets me so much that the brick and mortar bookstores are closing. i love to go to bookstores and that if you go, you can't get the book you want because the inventory you end up buying things online because as the retail gets hit, the inventory decreases and it's sort of a death spiral. so it's not just the internet sales. my time is up. mr. truman i think you for this hearing and i think that this is the beginning, not the end of our inquiry. >> fais bet reva gentlemen. it may not be the beginning of the and that it may be the end of the beginning. >> i meant the beginning of the
9:59 pm
inquiry. obviously i did not articulate -- can i ask unanimous consent to put into the record a listing of the business instead of whether the letters are too voluminous and opposition to go. >> the listing will be made part of the record and the chair will recognize himself for five minutes to see that the gentleman is quite right to read this issue didn't start with the internet. in fact, the supreme court decision that articulate it the standard was a mail-order case that pretty much predated any significant business being transacted on the internet and there are also telephone sales. i'm wondering if any of you are concerned about the fact that the advantage in foreign businesses. we talked about states not collecting sales taxes for businesses and other states but what about canada, mexico, the caribbean islands, hong kong, china, india. you can buy goods from a couple
10:00 pm
hundred different countries around the world and those countries are not being required and the law isn't going to reach a requirement they have to collect sales tax for the state in which the consumer is receiving a product. do any of you have a comment on that? mr. delbianco? >> you are absolutely true. if a consumer were bound and determined to find a way to avoid paying sales tax on that digital camera -- >> not bound and determined. he to go on the internet and to see an ad from a company in canada and say i like their price and i'm going to buy it from them. >> so it's absolutely true. consumers as the congress won lofgren said, consumers go on line for the choices they get. the lower prices, completely aside from sales tax they don't go online to save the sales taxes. there's more data to support the fact they go online to research their purchases and use that online research -- >> i have my limited time.
10:01 pm
mr. harper? >> this bill deals with the state tax authorities. what you are talking about is a very valid issue, but it's one that the congress has the authority to deal with the the tariffs and imports and all the others. >> absolutely right but it may have the unintended consequence of enhancing the -- if you think the business outside of the state is required under the current law to collect taxes, sales taxes for the state, it may have the unintended consequence of enhancing the competitiveness of businesses outside of the united states. >> i'm not going to disagree with that. >> let me ask you this. one of the concerns i have and i am sold on the fairness issue of the gentlewoman from california makes a good point about the offsetting cost of the shipping and handling charges that you encounter often on the internet. but there are lots of different defenses and the disadvantages of each type of we of doing business and the fact a brick and mortar business is required because they have in excess of the state to collect that tax
10:02 pm
and a business outside of the state selling into the state doesn't have that maxus and therefore isn't required to collect is unfair and finding a way to address that is a desirable thing. on the upper and the business outside of the state and i will direct this to the governor, it doesn't have to the representation in the state in terms of the whole process that one undergoes to collect the tax to the legislation that we are holding this hearing on to say with confidence the small business state could feel confident they are going to be treated fairly by the state that might be aggressive in pursuing the collection of taxes. we encountered this with business activity taxes and other things all the time making them to dance on the head of a pen to comply with all. what recourse do these out-of-state businesses have if
10:03 pm
they don't like the particular law that you're a legislature or legislature of another state might enact which would require them to comply with the requirement? >> ultimately it's the free-market system, and they have customers in those states that are saying we desire their product. it's been a good of the business in tennessee are not operating on the business they are on the fact that they are represented by a local member of the state legislature that goes to national and casts a vote on whether or not it is a fair way to make that business collect taxes for them. >> they don't have that representation if they are in richmond va or indianapolis indiana or anywhere else in the country. stegano appreciated the shout out. i would say that's not really an internet versus real issue. the same could be true of the retail chain that had one store in the state and their headquarters or somewhere else.
10:04 pm
i don't know that that changes with this argument. >> the other concern i have about this is i think we are on the road towards making the progress on cooperation but i don't think we are there yet. we have states that have joined together with the provision but this apparently that's the state that doesn't join to the streamlines health tax that may have one definition of what this taxable to numb the last step in and some of the largest states in the country are flexing their muscles with this legislation. california, texas, new york saying we want to be able to do this but we also don't want to change our sales tax rules to have some kind of uniformity for these interstate transactions taking place, and that is what comes back on the shoulders of the congress because we have the ultimate responsibility for writing the law, related to interstate commerce and doing so in a fair manner not only for the brick and mortar businesses but also for the small businesses that are at this point in time i think still
10:05 pm
confronted with a very complex many thousands of multitudes more complex than a business in in your state or another state numbing what the state's requirements are and only having to meet the requirements of the state. so i commend the author of the legislation, and i commend all of you for trying to find a way to simplify. but i would urge you to work further to bring about more simplification in terms of a definition to each state that wants to purchase of in this, we have one definition. i would prefer to see one rate, three is better than 9,000 some. but i would prefer to see something that made it simpler. and let me say with regard to small businesses, i am concerned about exempting them from this. the local small businesses and tennessee are not exempt from collecting the tax. and businesses out of state why if there is a million-dollar cap or some other cap why would do
10:06 pm
not want to grow in your business beyond that and when you do come you are going to face an artificial penalty for doing so and having to change your system and the tax you were not collecting before. if we are going to do this we find a way to make it work for everybody and at this time the chair will recognize the gentleman this jackson lee for five minutes. >> mr. chairman and the ranking member, i am thankful for this hearing and to have the opportunity to plunge into i think an issue as the gentleman from virginia has mentioned has been discussed for a number of years. many of us come from makarov with local government, city council and the city of houston after serving as a municipal judge it's not a city manager of government, in fact we've write budgets and seek opportunities
10:07 pm
for providing revenue to our constituents or services. likewise, the state of texas has a unique structure as well and i think it's important for the governor to note texas brags that it doesn't have an income tax and therefore it is in the recruiting business. but i would make the statement as well that the state's except for the politics have other unique measures. their individual states with casino gambling of all forms, and certainly that goes to the nature of the constituency. there are lotteries that have exploded across america and certainly opportunities there. but states continue to look. it's a curious situation to me because i come from a state where we have had the opportunity to receive $40 million of medicaid that was rejected so it makes it difficult when you think of
10:08 pm
opportunities to secure money that is rejected that you want to do something that may cause some concerns among your small businesses. so, in order to educate myself little better, i'm going to ask mr. delbianco -- and i will ask some of the other members as well an extensive questionnaire fight. first of all, i think in some important that we argue for tax simplification and the underlying bill seems to strike a chord possible overlapping confusion. and i think it is correct we need to find a way to handle this if by chance this bill passes and it is making its way through the love for this process. with the current state system is over 9,600 taxing jurisdictions. many said codes cover multiple taxing entities and the offense in today's wall street journal cites the dallas-fort worth airport in the state of texas as
10:09 pm
being in the six separate taxing jurisdictions. in addition the taxable goods varies from jurisdiction to jurisdiction and while in another the text is food because it contains peanuts. it's obvious to me even if we were to adopt the bill before we would have a long way to go. what responsibility does the federal government have to businesses to ensure a seamless and expensive transition to this new tax collection system if adopted? and then would you also comment on the fact is this a new tax and would the case be overturned? and i hope others are listening because i want to go to some others for that question. and i think the last point i would like for you to comment on is as i read the bill, it seems like it says $100,000 in sales in the states and collectively a million dollars. i would raise the concerns of the lady in the living room of her business, but also a sufficiently small business that
10:10 pm
may have $1,200,000 in business and is a small business, and would be an enormous burden to try to keep up with this new structure. would you comment, my friend? thank you. >> thank you, congressman. first you asked about the path of simplification and as the chairman pointed out, the bill before you only has three elements of simplification, whereas the congress considered as many as 16 minimum requirements and it is their job to impose the bold and list them sent to kissell requirements before it sweeps away the protection of the physical presence. within this bill to of the more fundamental flaw on the definition this bill permits each state to have its own definition because it doesn't even require all of the state's and this bill says each can provide its own software to each and every seller. so imagine the cellar having to take 46 different pieces of software because the bill doesn't require that they will be the same committee last about
10:11 pm
is a new tax? as we discussed earlier in the hearing it is absolutely a new tax burden on businesses to collect the tax is payable from the business from the consumer and in north texas, your state tax collectors said amazon has had a physical presence in texas so therefore you should have been collecting for the past couple of years and your state sued and as of two entered $90 million. amazon couldn't turn now to you and say the consumers didn't p.s. we don't have to because the tax is due from the retailer. in all cases with penalties and interest sandra steve used that as a bargaining chip to get amazon to keep its distribution center in texas so under the visible presence will we have today amazon will begin collecting in texas next year and they're goes a lot of what you think was beyond the skills tax. so does it overturn? in a way it completely blows away the physical presence standard. they said the congress has the
10:12 pm
right to do that. we know you have the right to do it but is it the right thing to do? >> do you think the exception is ha esf of the small businesses and do you hear my underlying premise that it is a strange number because if you could be small and go over the limit? >> i don't know that i am qualified to define what that is is it a million i do hear your underlying premise it is worthy of discussion obviously the internet businesses are a little less labor-intensive, so it is a pretty large internet business to be over a million because of the smaller sizes of employees. >> you believe in state rights business in mollifying the state law? >> just the opposite. when you are doing is giving the states the right to force businesses to collect the tax that is already due to them. >> i thank the chairman for his indulgence and i read it differently and i think we will have a long time for discussing and reviewing this matter to the
10:13 pm
estimate by thank the gentleman to read the gentleman mr. powell is recognized for five minutes. >> thank you for being here. as mentioned by my colleague ms. jackson lee, in texas we don't have an income tax. we are proud of it and if any public official advocates an income tax, they are a former public official. republican, democrat or independent. so, our main source of revenues property taxes and the sales tax business collect sales tax we have a pretty good system i believe that has been worked on for a great number of years as to the exception and who pays and how it is collected. i think states ought to have the right to collect a sales tax and the federal government shouldn't prevent them from having a sales tax. the states' rights issues as you mentioned governor. we have heard the stories about best buy so this weekend i went
10:14 pm
to a vast body in houston texas and talked to the folks that learned their, first of all unfortunately 50 best buy stores have gone out of business this year. one of the reasons they said they are competing with someone that is not in texas and they pointed out the fact that customers come in and get free advice about all these electronic gizmos i know nothing about and as they are walking out the store, they order it online and reap the benefits of the expertise of the store that isn't used in, and they get this big monster tv. there are other stories about -- because they don't pay the tax, they pay that eight a quarter% they are not paying the tax and get it for a bargain. that kind of bothers me that people would do that. but they do. and we have a problem also of small business. i'm talking about small
10:15 pm
business. it's one store, mom and dad were cousins or whatever owned one store and they have to compete with people online. it costs more to run one business store operation than a chain of course and there are even that take place with these small businesses that are out of everybody's control including the government. we call them hurricanes. just since i've been a member of congress in my congressional district we've had the experience of katrina, rita, gustav and ike. when ike came through dayton, texas, it destroyed, he eliminated businesses to the ground because of the wind and the rain. it is inexpensive that they have to incur to rebuild that small-business. western auto is a good example. i don't know how many western all those there are in the country but there is one left in dayton texas city rebuild all of those because they have a presence in the community going
10:16 pm
back to best buy they have a community outreach and police that working with the community doing things for the community, donating money and time to big brothers and big sisters. all these organizations because there is a presence to be biased and the on-line operation and why it works and why it's successful. governor, i want you to review what before you drink that clause of water expand on why you think we need to have the ability to mystiques me to have the ability to collect a tax that is already due the state as opposed to some have said this is a new tax can you explain the difference between the concept this is a new tax, versus states are just collecting the tax that haven't been paid for years because they were not allowed to collect. you expand on that? >> as we've said, it is a tax that is do we and i respect to
10:17 pm
cut my gentleman on the other end. but when amazon is sood, i don't remember the suit by the state of texas i bet they sued them for not collecting that tax. i'm betting that is what they sue them for so it wasn't the taxes that they were due but it's the they were not collecting that. the decision gave the congress the right to specifically address that. to your point, i keep coming back. it is basically an issue of fairness. some people pay it and some people don't and as a former mayor when the western although when away, you didn't just lose the sales tax you lost the property tax in the basic services and jobs and the same thing in that with best buy. it ultimately comes -- i understand all the issues talked about. it is very complex. but it's too big an issue of fairness not to address. >> and you don't buy your boots on line? >> i don't. >> meter deride. >> we have a lot of great stores
10:18 pm
and nashville. >> so do week. [laughing] >> chairman i yield back the balance of my time. >> the chair recognizes the gentleman from georgia, congressman johnson, for five minutes. >> thank you mr. chairman. i would respectfully disagree. i think that this is -- this is a new tax, and it's not simply a tax that is due to i think technically what we are doing here is imposing or seeking the ability of states to have the authority to impose a sales tax on the sale of internet goods. so it is a new tax for those who purchase their goods on the internet, and who don't up to
10:19 pm
this point have to pay taxes on that. i don't think there should be any disagreement with that. am i correct? anybody disagree? yes or no? you disagree. okay. well, i tell you i want to say right now that i am in favor of the market place equity act of 2011. having been a locally elected officials, a county commissioner chair of the budget committee, you know, understand the unfunded mandates that have to be met that are imposed by the federal government. i understand of the dwindling amounts that are collected through property taxes and also sales taxes on brick and mortar. and so, as a fundamental issue
10:20 pm
of fairness, i think it is only right that our -- everywhere from our big box retailers down to our small mom-and-pop operations should be treated fairly should not be discriminated against any tax law based on the fact that they have a brick and mortar location and a presence in a particular location. so i'm in favor of this legislation. but i feel the specter of grover norquist in the room, and so therefore i feel compelled to asked governor and representative harper with a one-out you as a republican state elected officials have signed onto the grover norquist read my lips no tax if have you signed on to it, governor haslam? >> i have not. >> how about you, mr. harper?
10:21 pm
>> i have not because i am accountable to the people that elect me. >> i fully agree. how come you didn't sign? >> indy 500 and i think people judge you by what you do and since i've been the governor we cut taxes four times and the actions speak louder than words. >> i know you said you disagree with me that this is not a new tax and we can get caught up in semantics, but you did say that $400 million in lost tax revenue is incurred by the state of tennessee, 20 billion by the nation. i can think of a whole lot of great things like police, fire, public safety, these kinds of needs that the local governments
10:22 pm
are deprived of that tax money because of our inability coming your inability to tax internet sales and that's why i support this legislation. but, you know, if grover norquist were to be sitting right here, and he made the observation that, you know, buy aiding or supporting this act that you would be aiding and embedding the state's in their ability to impose a tax increase on people who are not used to paying taxes on the internet sales, therefore it's against the pledge how would you respond to that? >> i would say i don't know what
10:23 pm
he would say on this, so i won't put words in his mouth, but my answer to that -- from whoever said it would be no, we are trying to help a nation of people right now for breaking ball buy not paying the taxes that they go. >> braking the law -- were herding the law? >> we will quibble about that later. >> yes, sir. >> in that same we have done surveys in the state of utah nearly three-quarters of the people and the state of utah when the bye online, they agree they are already paying the sales tax. they are unaware of the fact that it isn't being collected. is that i guess when they become aware of it, they will probably stay read my lips, no new taxes. but maybe not. i will yield back.
10:24 pm
>> thank you pure respect the chair now recognizes the gentleman from iowa, congressman king for five minutes. >> thank you mr. chairman. i'm here listening to the testimony, and particularly the judge from texas said you by your boots over the internet. i had to stop and think for a minute and i looked at the people on my jacket and i felt what do i really do? ackley every sood in my closet is from tennessee, and what i do is i go on the internet and i look at the inventory down at my local clothing store in dennison of iowa and i say can you give me a couple suits that need this and they've got my measurements and order them out of tennessee and do whatever is necessary to fit my figure and they put it on gps and shut up to eye o.s. i think i met all those standards and i hope it please the the governor of tennessee in the process. >> we are very grateful.
10:25 pm
this picture of what's going on in the free enterprise on have a letter that is -- i'm going to ask to be introduced in the record but it's from mark jorgensen and he is the editor in fort dodge of iowa. many states and have been made about the brick and mortar and retail businesses and the costs and the point of the property tax that gets paid because the main street businesses and he goes through that argument as well like we've heard from the witnesses and other areas but he puts it in a fairly compress' way as a customer comes into my store to buy hardwood and he wants to install with himself we show him the symbols and quote him $3 per square foot he goes homeland gets on the internet and as close to $3.15, a higher price but he buys a longline any way because the sales tax takes the price he has to charge of the brick and mortar store to 321 and i don't know the frites works out that's not in this narrative but this little margin that turns out to be seven per
10:26 pm
cent advantage that he has because of the sales tax and i allies generally 7% and here is where he makes the point and says my competition hasn't used his money to compete with me the state of iowa sales tax money to compete with me. that is the point that i would like to emphasize here at this hearing as we are all about competition. competition has made america a free enterprise as one of the central pillars of american exceptional wasn't that when the government competes or if you are in the position you can use a sales tax money as a competitive or comparative advantage, then you end up with people buying things over the internet to avoid the tax purpose. but this has been examined really well by the witnesses and by the other members of the panel. as i have another thought i want to inject into this and pose a question to the panel. first i should ask unanimous consent to introduce this letter into the record. >> without objection. >> thank you mr. trend. the other thought is on and one
10:27 pm
of those people that believe i want the irs out of my life. i want them out of the interference business of the free enterprise decisions completely. i don't want to have to look up the corporate structure and see they have the tax lawyers up there. i don't want to hear again from my son that owns a second generation of construction tell me then narrative about talking about a business proposal with an individual whose business background complement's his very wealth. for 90 minutes the discuss the business proposal and at the end of that time, david king said you realize our entire discussion about this venture has been about taxes, the irs, tax avoidance and how we are going to incorporate it into our model? we could have spent that time planning business and how to provide a profit or servicer of good that has a marketables advantage. and so, you will all know them by now that ibm for a national sales tax that i want to eliminate the federal income-tax
10:28 pm
for the irs we can find a way to collect this internet sales tax without the irs but here's the problem i have going forward with the tax situation as some of the opponents of the bill and therefore if they are not able to collect the simplest thing which is a sales tax on internet sales, when the world could we ever again have an internet sales in the world of a national sales tax and i turn to the governor to see if he would like to respond to that because you are a step that is a version of income tax and i appreciate if. >> i want to the whole national sales tax the data but if you were there obviously that would prove -- that would make the argument even more -- i do think you're basic argument about the retailer's they're using the state's money to compete is really what we are talking about. estimates before. i would turn to the representative and ask if you have a comment on the point that i make.
10:29 pm
>> i personally am in favor of a consumption or national sales tax within the others but that is just my opinion on speaking of the seals client tax -- sales tax. >> the states would be collecting on behalf of the federal government relating to the federal government. that is just an observation that i have. >> there would be fet with a back to the states would compensate them for their trouble and make sure there was there -- >> there would be the collection compensation. >> that's my plan anyway. i see the light has turned red so i would yield back the balance of my time. >> the chair recognizes the gentleman from california, congressman chu. >> before i can to congress i was on the board of equalization which is the nation's only elective tax board, and our primary responsibility was in fact to collect sales tax during the years i was on the board is
10:30 pm
on a steady decline in the sales tax revenue and today its cost or state $9.1 billion at the time when the state is facing a potential $6.1 billion in cuts in november much of which would be absorbed by the occasional and how your education. so this is serious business. one thing i know is that the current system doesn't work. the current system relies on individual compliance to pay their tax or the state entities to the auditing, very inadequate means to address this. so it's clear that we must pass legislation such as the marketplace equity act for july and a co-sponsor so the states can collect all the sales tax that they are owed, and i want to commend chairman smith for calling today's hearing on the bill but i hope we can work together to get a bipartisan bill to the floor before the end of the year. ..
10:31 pm
>> can you explain why small businesses are able to do this more efficiently than individuals can?
10:32 pm
>> is your microphone on? >> the current sales tax, your board -- they had the idea that not having businesses do it, every taxpayer pays for things. that would've been an incredibly inefficient approach. that is the notion of having the businesses doing this. it brings a degree of efficiency and makes it easier red that is why from the little data that we have, only in those states which have an effort to try to put the sales tax on their income taxes -- 1.1% of households are doing it. clearly, at the household level, it is an incredibly burdensome tax. the efficient solution regarding how it should be, is to get the
10:33 pm
companies -- the sellers, to use the scale economy to realize the efficient result. >> representative harper, i want to talk for a moment about the inefficiency of them auditing. you may have encountered that. of course, we call this tax -- but i can attest to the fact that there is a complete lack of compliance with these obligations by state. even in our state of california, we actually have a line on the income tax one that says that people have a use tax obligation. people don't ignore it. few people even know what 80 use tax is. they are shocked to find out what they even know it. which leaves auditing is our only alternative. but why is auditing more burdensome for the state and the
10:34 pm
consumer? >> just the sheer number of individuals audits that would have to happen in this case, particularly in a state as large as yours, makes it incredibly difficult. we did have one of our retailers put on yearly statements -- they say that you owed as much to the state. there was no threat of enforcement anywhere. once people were notified, we actually saw that the amount we collected off of that go up tenfold. but still, the ability to audit that will require an incredible amount of work. >> the governor is correct, as we have looked at it -- there are two ways to go from the correct use tax rate either individual doesn't order they feel like they would have nodded are sitting at the kitchen table, which would be very
10:35 pm
onerous and irritating. granted, in utah, we only have 1.6% compliance with the use tax. we have a line on our income tax return. most people don't even think about it. but i think some people more and more are thinking about it and saying i can save a little bit because of this government inequality that is on the books. >> thank you, i yield back. >> to the chernow recognizes the gentleman from arkansas. congressman griffin. >> thank you, mr. chairman. thank you all for coming. i appreciate your time. i first want to say that i want to congratulate my colleagues from arkansas. ..
10:36 pm
and so, i just want to make that very clear. i also want to talk about something. i support that. i'm a cosponsor, so as to say that. i support it because of fairness. i supported because of the current unfairness and the way that brick-and-mortar create versus internet business. i do not support it because i am worried or feel sorry for government not collect more money. that is not why i support it. i support it because i want a level playing field. because i hear from my constituents back home what
10:37 pm
businesses like hank's fine furniture in little rock and around and they talk about the different folks who may come in and shop and buy elsewhere. and there is a level playing field there. they are very involved in the community. they give to the community. they have a 4.7 million payroll. i asked them this morning before this hearing to give me some stats. they have 250 employees. and of course they have to hire people to fix their air conditioner and take care of the physical plant. i support this because of fairness. one of the things that i never hear discussed hardly at all in this context to go is what the states are going to do with the money. okay, so i'm on the record of supporting ms. and a lot of money will go back to the states
10:38 pm
and others. i think that every governor in the country, every state representative in the country, every state senator in the country got to go on record and tell constituents what they are going to do with the money that they are going to get as a result of this. my personal view is that we should reduce taxes commensurate with the additional revenue that comes in. that is what i believe. why do i say that? that way you get fairness between the internet and bricks and mortar, but you are not raising the tax burden. i understand you are not increasing taxes here. these are taxes on the books. but you have some people who pay taxes. so i think it is fair to say we have to ensure fairness this bill. it is up to the states, but
10:39 pm
every state rep come the state senator and governor are to tell us what they're going to do with that money. i personally believe they have to pay it to the taxpayer and if they think they need additional revenue, they can make the case. they can make the case to people. that is the way i would like to see it play out. obviously, that is set to the states. that is not something the federal government will decide. some states will enjoy the money and spend it this way. other states will have conservative leadership. i have averted gentlemen on this committee doubleday governor of a midwestern state. i don't want to steal his thunder, but i think he's indicated that he would like to take the additional revenue and return it by lowering some of the tax rates. so that's going to be up to the states to decide. but with this microphone, i'm going to preach that my opinion
10:40 pm
is we need to pass this. we need to have the fairness as a result, but we need to return the extra money to the taxpayers. >> thank you, congressman. i'll take that it's a question, maybe. what do you think? we have the second or third lowest combined state and local tax rate in the nation right now. so believe me, weare tracking. we've cut rates two or three times. here is the method that i would bring back to washington. i know you do agree it. we understand there's less money coming from washington in the future. somehow it has to get solved most republican i encourage you to get it solved. we understand there's less money coming from washington. we will live with that. you have to let us then go through our budget process as well and judge us by our records. we've cut taxes three times.
10:41 pm
>> mr. chairman, i threw my seconds? >> yes. >> i agree with you. one thing i would have to say think we were over the coming decade is going to be living in a world where less money will come up here. and that makes more sense. you've got small-town mayors asking, begging for federal money to build some thing completely unrelated in the federal government. it's because we've taken so much money in the first place and we have created dependency with those mayors and those city councilman and so they come begging us for money. i would much rather the money stay in the state and we take less of it appear. thank you. >> the chair now recognizes the gentleman from florida, congressman deutsch. >> thank you, mr. chairman. my friend from arkansas suggested he might hear some of the state representatives and senators.
10:42 pm
i would take this opportunity should point out that i would like to share every one of my colleagues that i serve with a nice body say exactly what mr. harper said quite heroically earlier and i.t. is and everyone who stays in this body is accountable to the people who elect them and not to grover norquist. so thank you for that. i wanted to be on the record with that as well. while that may talk about this legislation. i would like to broaden the discussion a bit. we talk about fairness; it can talk about the right, but i want to talk about the impact that goes beyond that mom-and-pop retailer who is that a significant competitive disadvantage today and talk about the other retailers who may not be impacted directly, but our impact did vary significantly by the level playing field we have today. here is how. i would love to hear from the panels about this.
10:43 pm
we know -- we have heard lots of examples about the individual retailers who have a customer come in, someone they think is a customer and they asked questions and take advantage of the expertise. they may leave or they may ask the retailer to match the price. often the retailer can't and they buy it online. we haven't talked about this the entire day. the rule of not just the retailer, but the entire main street or the entire shopping center plays in the community. and what happens because of the system is not just because -- not just the small retailers can't compete and may have to close, but yes there are some larger retailers as well but can't compete in how to close. let's talk about what happens when they do. if the larger retailer closes, the larger retailer blamed so often for all the ills of the small mom-and-pop, from the
10:44 pm
larger retailer closes, all of the employers lose their jobs and that has an impact on the community. and when the larger retailer in the small mom-and-pop -- when they'll start to close, their are other businesses on that block or in the shopping center who are also involved. the nail salon, the barbershops, the restaurants. when you have part of main street that goes dark, then suddenly you are not drawing as many consumers. there aren't as many people from the community who are coming to shop there. it is true on main street. and for those who represents suburban areas, it's true for shopping centers. and when there are lots of vacancies, it's a lot harder for those other service providers who don't pay sales tax austin. not my state, but it's harder for those service providers than
10:45 pm
to have that flow of customers who come to see that they are there but they are a purchasing something and then they were impacted. what's the impact than? they laid people off. they shut their doors. and suddenly you are in a situation where half or three quarters or all of main street is dark, not just the mom-and-pop retailer who couldn't compete as a result of the young level playing field. same is true when the shopping center goes dark. what happens in three quarters of it goes dark as there's a lot of people who lose their jobs beyond, as i pointed out, beyond just the individual mom-and-pop retailer who has been the focus of this hearing. a lot of people lose their jobs for people who think in the community near these shopping centers. or for people who live downtown near main street, they lose the ability to go out and pick something up in the stores that can no longer survive. they lose the ability to go and
10:46 pm
spend time with their -- with their community members and the shopping centers and the community loses corporate citizens who contribute to baseball teams, who contribute to the boy scouts, who contribute to making the community create. there's a lot more at stake than just the issue of fairness for one particular retailer. there is a community at stake here. i think that a sober yet to realize. that is why i support about these efforts. i guess i turn to our local elected officials first to see if they have anything to add to what i've just said. >> amen. total agreement. mr. chairman, i hope as we have an opportunity to move forward that we continue to figure out the best ways to do this and how the technology -- i hope we have another chance to talk about the technologies now that actually
10:47 pm
makes this collection easier than has been suggested at some point earlier today. i hope we can talk about that and the broader issues having to do with this legislation. let's not lose track of what is happening in our communities today because of a playing field that makes it too hard for too many to compete on. i appreciate that, mr. chairman and nigel back. >> thank you. >> the chair recognizes the gentleman from nevada, congressman and a day. -- amodei. >> thank you. usually in the last guy, so thank you for taking the anchor for me today. i appreciate that. mr. delbianco, i've listened to most of the staff and i get that i've looked through the testimony and some of the gentleman say that to the origin base. obviously those from the volunteer state are in favor and that sort of thing.
10:48 pm
is it your position that internet sales should not be taxed to either sales or use, or they tax exempt in your organization? since i waited a long time, i won't do something like mr. griffin did, but please be crisping your response because you're probably having as much fun as i am at this point. >> thank you, congressman. as all of us know, all internet sales are taxed exactly famous brick-and-mortar sales. every single catalog company, online company in nevada, 17 of the top 20 e.u. retailers. there's never want and no one has ever asked. but the quill case -- >> the question is yes they should be taxed in the yard. so that is yes in my view. you can say they are and we will
10:49 pm
spend time on that. having said that, and listen to your testimony about 10 thousand different taxes and jurisdictions with the alternative being i believe the gentleman from utah indicated it's like we've got a form on our site and can tax and we can do that. i don't know how many customers who have come up and guessing it's a bit more than 10,000 when you talk nationwide and gone for good we use the word efficiency and anything we do in the policy stance at this level. and i understand 10,000 is a big number, but relying upon the number of people that shop online for catalogs in nevada to fill that out, although we don't have an income tax, we do have a use tax. it's like seriously, at some point in time efficiency has to come into play. where is the best spot for this? it's not that amazon had to save taxpayers that amazon decided not to charge a tax whatever happened in the lone star state didn't go that way. so it's that way everywhere. when they talk about the bill
10:50 pm
because it's not perfect, surely we are not going to rely upon the tens or hundreds of millions of customers nationwide to file those documents as opposed to using a point-of-sale, whether it's at the origin rate or at different rates depending on the jurisdiction. >> you're absolutely right. it's crazy to expect consumers to submit use taxes. what will happen is the native bill to truly simplify the way they set out after the quill ruling. where offenders are compensated for the cost and collections, just like an state vendors. one audit for all 46 states. a small solar exemption that protects the small company in your state who's just trying to satisfy custom orders outside of nevada. >> i get back, but then they get into the fairness staff that mr. deutsch -- if i happen to be
10:51 pm
business in california and nevada get a $500,000 exemption, but in reno i don't? that bothers me a little bit on the general fairness staff. >> i appreciate you thought about this, but here's so we recommend. is your alternative he won an exemption and simplified one return per state and then it's okay to do use for sales tax? >> up the implement simplifications in there and there's simpler to what mr. henchman has in place can we then turned to the smaller exception. the small solar exemption can be as low as a million dollars. i explained that as a one-person or or two person can't be at most. you talk about fairness. is it fair for one person shipping or specialty items around the country to collect all those jurisdictions? and needs to be high enough and yet still allow the states to collect 90% of what they claim they're not getting on a level of 15 million sales kits than
10:52 pm
90%. >> are you aware of anywhere in the most solar exemption? >> under federal law from a small business administration says they were under 20 million. the question is, is there an existing exemption anywhere if you are aware of this as your sales are below asked about a year you don't have to collect a reduced tax? >> why would we create one in this context? >> the federal government as recognizing the burdens and the quill you should enact a small solar exception. they need congress to force businesses to comply in congress ordinarily like to bill you passed this year the small business tax cut for small businesses under 500 employees. that may not be appropriate for retail, but she do small solar exemption. >> you have access to my time. thank you for doing so in thank you for your response. >> the chair now recognizes the gentleman from colorado.
10:53 pm
>> thank you, mr. chairman. i'd also like to engage with mr. delbianco. i want to understand, sort of breaking out how many small businesses is worth sales and margins. if there is a small company could be anything in their sales or a million, 2 million, what would be typical of the margins? how much more selling good for them but they purchase for? >> thank you for the question. but look at gross margins, cost of sales as a percentage. a range anywhere from 30% down to 20% and the data in the data. so i use 25% example to articulate earlier today than a million dollars settlement release of 750,000 for cost of sales and has to cover expenses for website accounting into your programming. >> your estimates further showed that the cost of collection i
10:54 pm
believe this is from the streamlined sales tax estimates that it will cost about 17 cents for every tax dollar it collects for the state? >> that's the streamlined sales tax collected. >> that would effectively in many cases wipeout the margin for a hypothetical million dollars business coupled with the gross margin in the cost of compliance and all the other caused. it might've been a business that previously had a small profit. but after this additional burden, it would cause it to go into the red. is that possible? >> yeah, absolutely. the concern is in a situation where you have a problem that can no longer exist profitably, the one exists, therefore they won't pay any taxes to the government. it's a very hypothetical tax when you talk about imposing it on businesses and the 500,000 or
10:55 pm
million dollars in gross sales level, where in many cases these taxes would be a deterrent to even having that sort of business. they would be very difficult. under 150,000 is being taught about and then went to her several million, whether five, 10, 20, whatever it is you might be able to absorb some compliance cost. but there is very little to spare for many businesses in that middle ground that we hope the job growth emerges from. these are not in many cases terribly profitable. they may be purchasing something for 750 and selling it for $10. some of them are even less than that. the more competition in the marketplace and the internet obviously encourages and makes it easier to competition. the more squeeze on the margins in general and that's obviously
10:56 pm
the team for consumers. and the more officially retailers are able to turn around products and operate, consumers will benefit from that. now again, the flipside is this is both a compliance cost and a tax on the growth sales, not on the margin. so when you have a particularly lower margin product, you are effectively taxing the growth sales, which will make it very difficult to profitably sell low margin products, which are equally as important to the economy as high margin products. therefore, that makes the estimates of the taxes collected hypothetical in the sense that many businesses they would be collected from what actually be driven out of business or an economical. by having to those comply with
10:57 pm
and pay these taxes, which would otherwise have letter rate any margin that they have. i was also wondering, mr. delbianco if you could also say mail order has exist as long as i've been alive, all those days, this has always existed. we've had the issue during the next phase. why is this any different today other than basically have it anymore volume going through mail-order channels, which by the way it was the in the sears catalog. that was a big deal. is there really any difference in the landscape? or is it just in order of the volume coming through these channels? >> you're absolutely correct. the quill ruling had to do with remote versions on businesses to have to collect taxes in places where they had no presence at all. >> many as they grow actually
10:58 pm
established nexus is in many different states for logistical reasons, business reasons. as they do so, they of course fully contribute to the states as well as one of the natural sites is growing. that's where the large e-commerce countries operate and pay taxes in a number of states. they operate as well. i think as we look at a small business, it sounds like a lot of business. but a lot of money. it's important to point out this is not somebody goes to the bank with a million dollars a year. they may be earning $75,000 a year. the earnings may be wiped out entirely if they have to hire accountants and implement software and take their time away from selling their product to manage the compliance of this until they get to a size were truly they can insert any of those other caused. i yield back. >> i might add the only player
10:59 pm
this season with congressional baseball season to get an inside the park home run. >> i think the chair for the credit. is officially scored as they two base error, but i will take the home run. >> will chalk it up to that. the chair now recognizes the gentleman from california. and i might add also, the only woman to be drafted in the congressional baseball team this year, congresswoman sanchez. >> thank you, mr. chairman. and i thank all the gentleman on the panel for being so patient and i was not here for much of that hearing, so i apologize if i cover a territory that's already been covered, but i'm a good fan of h.r. 3179, the marketplace equity act. i think it is a great bill and i applaud the committee for discussing it

94 Views

info Stream Only

Uploaded by TV Archive on